CalPERS rehired State Street as global custodian of the $232.2 billion system, spokesman Wayne Davis confirmed.
Two other firms — J.P. Morgan Chase and Bank of New York Mellon — also made bids to the California Public Employees' Retirement System, Sacramento, offering prices for a new enhanced service model providing for complete transparency around pricing and reporting. State Street's price — $5.7 million — was “far less” than that offered by the two other firms, Mr. Davis wrote in an e-mailed response to questions.
State Street, which also is custodian to the $154.6 billion California State Teachers' Retirement System, West Sacramento, was sued in December 2009 by Jerry Brown, who was the state's attorney general at the time. The suit alleged that State Street had overcharged both systems by at least $56 million for currency trades between 2001 and 2008.
The state seeks more than $200 million in damages and penalties. Mr. Brown was elected governor last year; the case is being pursued by state Attorney General Kamala D. Harris, who also was elected in 2010.
The California lawsuit was the first in a series of legal actions taken by states on behalf of pension plans against State Street and Bank of New York Mellon for currency trades. State Street and BNY Mellon have denied the accusations in the separate cases and said they will defend against them.
The FX transactions handled by State Street represent a small fraction of the system's trades with 98% handled internally, according to Mr. Davis.
“CalPERS has been handling the vast majority of our foreign exchange trades internally since 2003. Moving the trades in-house means that we can avoid any issues or conflict that might arise when external managers are used,” according to Joseph A. Dear, chief investment officer.
State Street's previous contract expired June 30. The new contract, effective July 1, is for five years.